Best Buy Is Best Of The Best

The No. 1 CE specialty chain, which scored its second consecutive wins as Best National Retailer and Retailer of the Year in TWICE’s retailing awards competition, would deserve recognition if only for its bold decision to radically reinvent itself while still at the top of its game.

That the bold gamble it calls customer centricity appears to be paying off would cinch its award-winning status in this or any other industry.

According to its most recent earnings report, comparable store sales at the company’s customer centric locations were more than twice that of the chain overall. In addition, compared with last year, segmented stores delivered a higher operating income rate and more operating income dollars than they did during the comparable period last year.

The retailer currently operates 187 customer centric stores, and a wave of 58 segmented units is expected to be rolled out by the end of this month. Encouraged by the early success of the new business model, Best Buy said it will convert an additional wave of about 50 locations as early as this coming February, and that all newly opened stores will embrace the customer centricity model. The company anticipates beginning its next fiscal year, in March of 2006, with at least 350 segmented stores.

“We believe that this approach, which helps us engage with our customers differently, is essential to Best Buy’s success,” said vice chairman/CEO Brad Anderson. “In the coming years, more products will become digital and more homes will become networked. The increased complexity in the business will require more complex labor in our stores and additional services capabilities, which we are now building.”

The changes did not come without a cost, though: Expenses hit 21.6 percent in the second quarter, compared with 20.8 percent in the previous year, the company said, driven by operational costs associated with expanding the services business across the chain and using the customer centric operating model at more stores.

However, the higher expense structure is expected to abate as the new model matures.